The Blubber

The Bloomberg Dollar Spot Index dropped as much as 0.7% on Friday, extending its year-to-date loss to over 7%. The U.S. dollar has now declined in four of the last five sessions, as renewed tariff threats from former President Donald Trump — targeting both the European Union and Apple Inc. — deepened investor concerns about the broader implications of his trade agenda on the U.S. economy.

“A substantial hike in tariffs on U.S. imports from the EU once again raises the risk of recession in the U.S., along with increasing policy and economic uncertainty,” said Aroop Chatterjee, a strategist at Wells Fargo in New York.

Friday’s losses persisted despite assurances from Treasury Secretary Scott Bessent, who told Bloomberg Television’s Wall Street Week with David Westin that the U.S. could finalize several major trade agreements within weeks. Bessent also pushed back on characterizing the dollar as weak, arguing that recent foreign-exchange movements were more about gains in other currencies than broad softening of the dollar.

The greenback’s slide provided a boost to all of its Group-of-10 currency counterparts. The New Zealand and Australian dollars each climbed more than 1%, while the Japanese yen also gained ground.

Dollar ‘Jitters’

Investor sentiment toward the dollar has been deteriorating for months. Speculative traders — including hedge funds and asset managers — now hold approximately $16.5 billion in short-dollar positions, the highest level since September, according to data from the Commodity Futures Trading Commission for the week ending May 13.

Market unease has also been fueled by the Senate’s review of Trump’s tax bill, which includes a debt ceiling increase that the Treasury argues is essential to avoid a potential default as early as August or September. The version of the bill passed by the House is projected to add hundreds of billions of dollars annually to the federal deficit.

“The jitters around the U.S. budget suggest that markets are reassessing the narrative of U.S. exceptionalism,” said Jane Foley, a strategist at Rabobank in London. “Whether the concern is over the budget, inflation, or growth, investors are approaching U.S. assets with greater caution — and that continues to pressure the dollar.”